Tata Steel U.K. said Friday it had signed an arrangement with pension trustees to separate the plan from the company, in exchange for a 550 million pound cash injection and stake for the pension fund in Tata's business.
Following completion of the RAA, the scheme will offer members the choice to either transfer to a new scheme (if it meets certain qualifying conditions) that will be sponsored by Tata Steel UK, or remain in the existing scheme which will transfer to the PPF, it said.
The Pensions Regulator (TPR) confirmed it had agreed to the Tata Steel proposal to restructure the BSPS, to avoid the company becoming insolvent.
"Although the Pension Protection Fund is an important safeguard for pension schemes generally, the trustees believe that the BSPS has sufficient assets to fund benefits in the new scheme that will be better than PPF compensation for most members, and to do so on a low-risk basis sustainably into the future".
At the end of that period, and in the absence of any referrals, it is expected that The Pensions Regulator will confirm its approval of the RAA, which would take effect after Tata Steel UK makes a payment of £550 million to the British Steel Pension Scheme. After the accord was signed, the pension regulator issued a clearance statement that marks the commencement of a 28-day period during which parties directly affected by the RAA may refer the decision to approve it before the Upper Tribunal of the United Kingdom court system.
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Koushik Chatterjee, Tata Steel's Group Executive Director, said the RAA process has been a long and detailed one, and thanked everyone involved, including the United Kingdom and Welsh governments, for their constructive engagement through the process.
Reuters earlier cited Thyssenkrupp officials stating that it was still in talks with Tata Steel over a possible combination of both groups' European steel businesses, adding it would not be rushed into any deal even after an outstanding agreement over Tata's pension obligation might be reached. There remains no certainty with regards to the eventual existence, size or form of the new scheme and the funding position and membership of any new scheme is still dependent on the results of the proposed voluntary membership transfer exercise.
The UK's steel sector trade unions, Community, Unite and GMB, put out a joint statement welcoming the move.
Tata steel says the deal follows "prolonged and intense discussions" and negotiations with the BSPS, the Pension Regulator and the Pension Protection Fund, the industry lifeboat for pensions.
The British Steel Pension Scheme said it would write to its members in the next few weeks about the new scheme.
Lesley Titcomb, chief executive of the regulator, said: "We do not agree to these types of arrangements lightly but after several months of robust negotiations in this case, we believe that it is the best possible outcome for everyone involved in what is a very hard situation".